Strong kiwi weighs down shares

New Zealand’s benchmark stock index extended its losses, locking in a third consecutive weekly decline as the kiwi dollar continued to climb.

Friday, September 18th 2020, 6:10PM

by BusinessDesk

The S&P/NZX 50 Index fell 143.61 points, or 1.2 percent, to 11,633.52. Within the index, 32 stocks fell, 13 rose and five were unchanged. Turnover was $420.8 million.

The index moved sharply lower in an extended session to accommodate heavy volumes as the S&P/NZX and FTSE Russell Indices completed their quarterly rebalance.

A poor lead from US share markets set a negative tone for the session, carrying a trend from a disappointing announcement by the Federal Reserve on Thursday.

Chris Smith, general manager of CMC Markets NZ, said investors had been disappointed the American central bank offered no further quantitative easing staying in “wait-and-see mode”.

The declines on Wall Street had pushed the US dollar lower, driving the already strong local dollar upwards.

The kiwi dollar started the week at 66.60 US cents and gained almost 2 percent, trading at 67.87 at 5pm today; also up from 66.85 cents yesterday.

“The surge in the New Zealand dollar is probably the main story of the week,” Smith said.

The “too strong” currency was hurting the index’s heavyweight exporters, such as Fisher & Paykel Healthcare at $32.25 which fell 0.6 percent today and 3.6 percent across the week. A2 Milk Company declined 1 percent to $17.70 today and is off 2.9 percent this week.

“This is more a story about a weaker US dollar rather than a buoyant New Zealand economy story, although GDP did come in better than the worst expectations,” Smith said.

The trade-weighted index was at 72.61 at 5pm, from 71.84 yesterday. The kiwi traded at 92.72 Australian cents up from 92.02 cents, 71.13 yen from 70.24 yen, 57.28 euro cents from 56.85 cents, 52.37 British pence from 51.72 pence, and 4.5845 Chinese yuan from 4.5302 yuan.

Fruit exporter Scales Corporation led the market lower, falling 5.5 percent to $4.68, followed by milk producer Synlait Milk, which declined 3.8 percent to $5.80.

Fonterra Shareholders Fund units rose 0.3 percent to $4.06, bucking the trend after Fonterra posted a profit following two years of losses and said it would resume paying a dividend of 5 cents per share, the low end of its 5-to-7 cent range.

“It’s a net positive for the economy to see our biggest farming exporter posting some profits,” Smith said.

Tourism Holdings also made gains - up 9.8 percent at $2.35 - after reporting an underlying net profit of $20 million, down 28 percent on the prior year result of $27.9 million, but a strong result considering the impact of covid-19.

The company had cut its wage bill by more than half from April 1 to May 31, with labour costs dropping from $14.5 million in 2019 to $6.1 million and it received $5.3 million from the NZ and Australian wage subsidy schemes.

Heartland Group Holdings continued to gain, rising 0.8 percent to $1.27 after its result yesterday, which outperformed research firm Jarden’s forecast largely on higher-than-expected net interest.

Jarden retained its neutral rating on the stock and lowered the target price from $1.35 to $1.33. Meanwhile Heartland’s chief executive Jeff Greenslade said the share price didn’t “appropriately reflect” the business and was looking for ways to “get a better recognition of value”.

Tags: Market Close